WASHINGTON (Reuters) - President Barack Obama can expect mounting pressure to make new concessions on healthcare reform, especially the requirement that all Americans obtain insurance, after delaying penalties for businesses for the first year of his plan.
The U.S. Treasury said late on Tuesday it would grant businesses with 50 or more workers a one-year reprieve from having to provide health coverage to full-time staff.
The move appeared to ease the concerns of major companies about being ready to meet new reporting regulations in time for a January 1 deadline. But it raised new questions on whether Obama's signature domestic policy is unraveling or falling prey to fears about the Democratic Party's election prospects next year.
"It does represent the inability of the administration to implement the law as planned," said Robert Blendon of the Harvard School of Public Health. "The big question now is whether they're still going to require individuals to pay a penalty if they don't obtain coverage, if they're not going to require it of businesses."
Administration officials say the change affects less than 5 percent of businesses, as the overwhelming majority of employers already provide health coverage. But that could still involve as many as 10,000 businesses and hundreds of thousands of workers, according to reform advocates.
Leaders in the Republican Party and business community seized on the announcement as a sign that the entire Patient Protection and Affordable Care Act was in jeopardy, particularly the individual mandate.
But administration officials and consumer advocates said Obama could not back down on the individual healthcare requirement, which is meant to ensure that enough Americans sign up so that the reform would be financially viable.
The individual mandate, which the U.S. Supreme Court upheld as constitutional a year ago after a lengthy legal battle, is the government's only lever to compel young healthy people to sign up for federally subsidized coverage in new online health insurance marketplaces that are slated to begin enrolling new beneficiaries on October 1. If too few younger adults enroll, insurance costs could soar and jeopardize the entire reform effort.
"It's going to be really hard to impose the individual mandate without an employer mandate. And if you cut that, you could see the whole thing start to unravel," said Katie Mahoney, executive director of the powerful U.S. Chamber of Commerce.
Administration officials said a delay in the individual mandate was not under consideration, while former Obama advisers played down the significance of the employer mandate announcement on Tuesday.
"This decision isn't a big deal. It won't affect that many firms," said Nancy-Ann DeParle, a former senior White House aide who was deeply involved in developing the healthcare law.
"People will still have a responsibility to get covered and those who can't get affordable coverage through their employers will be able to come to the new marketplaces and get it."
The mandate for individuals takes effect next year and imposes a penalty, of either $95 or 1 percent of taxable household income, on Americans who have not obtained health insurance. It rises in phases to $695 per person, with a cap of 2.5 percent of household income, by 2016.
Administration officials insist that the bigger incentives for individuals to enroll are federal subsidies to buy insurance, and an expansion of the government's Medicaid program for the poor set to take place in just under half of the 50 U.S. states in 2014.
Ron Pollack, executive director of Families USA, a nonprofit group that has long pushed for affordable healthcare for consumers, said Obama's administration would not take steps to weaken a provision that "is essential for some of the key and very popular reforms in the law." These include prohibiting insurers from denying coverage for pre-existing conditions, and charging higher premiums based on health status.
Pollack and others believe that the insurance industry would also not accept a retreat from the individual mandate. Health insurance industry officials had no immediate comment on the move.
But some analysts said the White House ultimately may have little choice, as political rhetoric heats up ahead of the 2014 midterm elections, which will determine the makeup of Congress in the final years of Obama's presidency.
"Things are getting bad when you can't even successfully implement your own flawed ideas, and the question now is why should businesses and corporations get relief while individuals are forced to comply with the President's health care mandate?" Louisiana Governor Bobby Jindal, who chairs the Republican Governors Association, said in a statement.
Republican House of Representatives Speaker John Boehner also called on the Obama administration to provide a similar reprieve to individuals.
"The administration doesn't want to say the word, 'mandate'. They want to say that people are going to be able to get affordable coverage," said Joe Antos of the conservative American Enterprise Institute. He believes the administration will try to steer clear of the issue in the hopes that healthcare reform's other incentives will win over voters.
"If we get to the end of the enrollment period next March, and the general feeling is that it wasn't so bad and people didn't have to pay an arm and a leg, then politically they're O.K."
Additional reporting by Steve Holland in Washington and Sharon Begley in New York; Editing by Michele Gershberg and Richard Chang